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AMPS - An Overview
There is a lot of fear and uncertainty within the import and export
communities about AMPS, the Administrative Monetary Penalty System
being implemented by Canada Customs on Oct. 7th, 2002. Some of this
is generated by people who stand to benefit from companies overreacting
to inaccurate characterizations of what exactly AMPS is.
So,
let's dispel the myth:
You are not going to go to jail if you don't pay a consultant tens
of thousands of dollars in fees to make sure you're "compliant".
At NoGlobalBorders, because we started as a self-clear software
provider, we see ourselves as importer and exporter advocates and
think you should have a balanced view of the intent of AMPS. The
CCRA (customs) is finally enforcing rules that have, in fact, been
in place for quite a while. While we're not apologists for the CCRA,
and have some concerns about how AMPS will be consistently applied,
we feel that the canny corporation can use AMPS as a catalyst to
improve their import/export process and significantly reduce its
costs.
 What
is AMPS?
Canada's trade laws and systems of duties and tariffs exist to
help protect Canadian manufacturers from cheap overseas labour
and to prevent dumping of goods below cost within Canada's borders.
As long as importers in Canada properly declare what's being brought
into the country and pay the proper duty and GST, the system works.
However, for years Canadian importers and exporters have not been
universally and consistently doing their part. Many importers
and exporters were completely fulfilling their obligations, often
by using a customs broker, and often despite the difficulties
of shoddy shipping documentation and an incomplete understanding
of a complex and enormous body of legislation and regulation.
Even some companies that used a broker were making mistakes, simply
because their brokers did not take the time to completely understand
the nature of the goods that were being shipped across the border.
Unfortunately, although many corporations were doing their best
to comply, there were (and are) still a significant number of
companies who do not properly report goods coming into the country
or, when they do, who either accidentally or deliberately misclassify
their products to take advantage of lower rates of duty. This
means that a competitor of yours may be paying significantly less
for their raw materials or finished products, or may be able to
export far more cheaply simply by not complying with CCRA regulations.
This puts your organization at a competitive disadvantage before
you even go to market with your goods and services. It is this
competitive imbalance that AMPS is meant to address.
AMPS finally provides Canada Customs with a framework for assessing
financial penalties to a documented set of customs infractions.
As part of this program, CCRA has produced a schedule which affords
them an objective basis to determine when there has been a contravention,
and provides a very specific set of penalties. This schedule (available
with other information about AMPS here),
outlines every type of customs infraction that falls under AMPS
and identifies the applicable penalties, which may range from
$25.00 (for a first offense of a minor nature), up to $25,000
or 60% of the value of the shipment and/or criminal charges (for
deliberate attempts to defraud or multiple serious infractions).
These penalties apply in addition to any other penalties or fines
that may be levied.
Why
Now?
Although September 11th has been cited as a catalyst for almost
every new security and border initiative, the AMPS initiative
actually predates the World Trade Center attacks. However, it
coincidentally dovetails well with the many objectives of the
9/11-precipitated
cross-border initiatives recently announced by US and Canadian
authorities. The CCRA and the US Customs Service have limited
(but increasing) personnel, and would rather allocate these limited
resources to inspecting "suspicious" activity, rather
than having to randomly inspect everyone. Because one of the principles
of AMPS is that every customs officer will have access to your
organization's complete trade history, the decision to inspect
your particular shipments will be based on past AMPS contraventions.
Simply, they can now focus their attention on organizations with
a history of poor compliance. AMPS gives them a new tool that
they can use to protect our borders and our manufacturing competitiveness.
In addition, globalization means that more than ever Canadians
are buying from and selling to the world. Negotiators who develop
trade agreements with other countries to ensure that our goods
and products are competitive on world markets depend partly on
StatsCan trade statistics. These statistics are only as good as
the data used to generate them, and poor reporting by importers
and exporters has the potential to greatly skew this data, leading
to poorly negotiated trade pacts.
Finally, Canada has ambitious plans to help Canadian importers
and exporters source and sell their products more easily on the
world stage. Programs such as Customs Self-Assessment can reduce
the onus on importers, allowing them to report monthly on their
trade activity and introducing "Fast Lanes" at the border
for participants, significantly reducing the administrative cost
of bring goods into the country and improving delivery times.
AMPS is the "stick" to CSA's "carrot", and
companies who ensure compliance and have few AMPS penalties can
benefit from an improved relationship with customs and a smoother
CSA application process.
What
Does My Organization Need To Do?
Canada Customs has a useful "AMPS preparation checklist",
which we've summarized here. For the entire list, check out their
website here.
As the Importer, you are responsible for your compliance levels,
regardless of whether or not you use a customs broker. With few
exceptions, all AMPS penalties accrue to the importer,
not the broker.
Look at your current customs-related systems, processes and documentation.
Like your personal tax documentation, you need to keep all documentation
related to your imports and exports for years. Could you produce
documentation related to any one of your imports on demand? Canada
Customs will be increasing its auditing activity in parallel with
the AMPS rollout. Failure to be able to produce the original shipping
documents and invoices as well as valid certificates of origin
will result in fines. Have you sat with your broker, your traffic
department, carriers, and other service providers and verified
that you are classifying your goods properly and fulfilling your
documentary requirements?
Ensure that you've got a process for reconciling your accounting,
receiving, and purchasing departments' activity with your customs
activity. What you declared as a shipment value should agree with
what you paid. This is one of the major areas of investigation
during a customs audit. Did you receive at your dock what you
declared to customs and what you paid your vendor for?
Finally, you should assess your overall level of compliance,
develop a plan for ensuring that you correct any shortcomings
in your processes, documentation and systems, and establish a
system for monitoring the ongoing effectiveness of your compliance
efforts.
How
Can We Benefit From AMPS?
For years, many organizations have had no personal interaction
with Canada Customs because they have outsourced all their customs
responsibility to their broker. Generally, this has meant that
the only time they have ever heard from Customs is when something
has gone wrong. This is exactly the opposite of how NGB thinks
companies should be interacting with Customs.
You should own the relationship with Customs, not your broker.
Customs officials have a fair amount of latitude in assessing
AMPS penalties, and developing a working relationship with your
local customs officials can help them understand your compliance
efforts, and help them determine if the mistake was a "one-off"
mistake, or a systemic problem in your process. By being proactive
in assessing your AMPS readiness and working with your local customs
office to ensure high levels of compliance, you will benefit from
their goodwill in a number of ways. You will likely get the benefit
of the doubt both in their assessments of AMPS penalties, as well
as during the dispute resolution process, which is also thoroughly
set out in the AMPS documentation.
Finally, because AMPS has the potential for putting your organization
in Customs' spotlight, a good AMPS compliance strategy can significantly
prepare your organization for participating in Customs Self-Assessment
and future customs initiatives. The opposite side of the coin
is that a failure to prepare for AMPS means that you may hamstring
your ability to benefit from those same programs, which will ultimately
result in putting your organization at a competitive disadvantage.
What
Should We Do Next?
Firstly, don't panic.
You still have time to prepare for AMPS, and the CCRA's
AMPS website is a great place to start. There is likely enough
there to get you started in assessing your current compliance
levels, and to kickstart the development of a compliance strategy.
If you'd rather consult with someone to assist you in developing
and implementing a dynamic compliance process, NoGlobalBorders
can help. Our consulting professionals have decades of experience
in helping Canadian companies ensure that they use "best-practice"
processes and that they are proactive in evolving their international
trade strategies. This should not require tens
of thousands of dollars in investment
Secondly, take this seriously.
As we mentioned above, your organization will be liable for most
of the penalties assessed under AMPS. If nothing else, ensure
that your contract with your service providers transfers liability
for mistakes to the provider, or otherwise protect yourself from
bearing the direct costs of these penalties. Ultimately, however,
the government will come after your organization for payment.
The best protection you can get will come from educating your
organization, your carriers and your vendors, and developing a
compliance strategy.
Finally, use this as a catalyst to take control of your
customs process.
Use the fact that you are finally having to understand how your
organization gets goods into the country to improve your purchasing
procedures, and to apply for programs like customs self-assessment.
If you are self-clear, you should
be able to generate valuable reports to significantly reduce your
costs. Depending on your customs broker, you
should have access to your trade data to make better decisions
about sourcing your products.
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